Singapore’s largest lender, DBS Group, announced an upbeat Q1 earnings this morning. Net profit climbed 9% to S$1.65 billion, or S$0.645 per share, which is higher than Bloomberg’s compiled consensus of S$0.59.

An ordinary dividend of 30 cents was declared, on track from the last financial year’s total payout of S$1.20. ‘Healthy business momentum and a higher net interest margin more than offset the impact of a high base for wealth management, brokerage and investment banking fee incomes as well as a property gain a year ago’, the bank said.

It's worth noting that DBS’s return on equity (RoE) has improved to 14% to a decade-high, thanks to widening net interest margin (NIM) and lower provisions. Loan growth, however, has slowed to 5% to S$347 billion due to unattractive pricing and a general market slowdown. Net interest income rose 9% to S$2.31 billion, buoyed by a 5 bps uptick in the NIM. Net fee income fell 2% to S$730 million due to mixed performance in market-related businesses and high-water mark a year ago. The bank is currently trading at 11.42 times trailing P/E, with a dividend yield of 4.35%.

Oil prices fell sharply last Friday as markets re-assessed the risk of President Trump exerting political pressure over Saudi Arabia and other Opec members, to increase output in order to push down energy prices. The Iranian oil sanction waiver will expire on 2 May and the US has decided not to extend the 180-day waiver, potentially forming a supply gap of over 1 million barrels a day in the global market. But the White House believes that Opec+ countries have the spare capacity to fill up this gap without compromising their production cut agreement. Mr Trump’s tweet last Friday is perhaps a wake-up call for oil traders, who now need to look at the downside rather than the upside.

Technically, Brent oil prices have broken down its SuperTrend (10,2) and entered into a technical correction as the trend indicator has suggested. Momentum indicators RSI and DMI have both contracted from their recent peak. Immediate support and resistance levels can be found at US$ 68.3 and US$ 72.5 respectively.

Higher-than-expected US Q1 GDP readings boosted market confidence over the weekend, with 9 out of 11 major sectors finishing higher on Friday. A big fall in crude oil prices dragged the energy sector lower. This week’s Fed meeting may end with a positive tone to address the health of the US economy, especially following the 3.2% growth in the first quarter. The futures market, however, continues to price in rate cuts by the end of this year. According to CME’s FedWatch tool, the likelihood of a rate cut by 19 December has risen to 66% from 41% as of a week ago.

Asian markets opened higher on Monday following strong US GDP readings, and a 13.9% jump in China industrial profits in March. This may help to alleviate concerns over earnings weaknesses in Chinese equities, which have entered into a consolidation phase recently due to profit taking. According to Bloomberg, earnings growth for Shanghai Composite is likely to jump 33% year-on-year this quarter following a decline of 12% in the previous quarter. Some leading indicators such as credit lending, manufacturing PMI and exports have shown early sign of bottoming out recently.

Crude Oil Brent - Cash chart


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